Errors Found in Study Materials P1.T3. Financial Markets & Products (OLD thread)

[Nicole Seaman]

Please use this thread to let David and I know about any errors, missing or broken links, etc. that you find in the materials that are published in the study planner under P1.T3. Financial Markets & Products. This will keep our forum much more organized. We appreciate your cooperation!

PLEASE NOTE: Our Practice Question sets already have links to their specific forum threads where you can post about any errors that you find. The new forum threads are for any other materials (notes, spreadsheets, videos,etc.) where you might find errors.

Information needed for us to correct errors:

• Reading
• Page number
• Error

 

[Nicole Seaman]

Error noted by S666:

 

[onion]

Hello @Nicole Manley

Is page 13 in the notes for reading 19 (Hull, Options, Futures & Other Derivatives, 9th Edition) meant to be empty?

"Describe some of the risks that can arise from the use of derivatives."

Thanks!

 

[Nicole Seaman]

Hello @Nicole Manley

Is page 13 in the notes for reading 19 (Hull, Options, Futures & Other Derivatives, 9th Edition) meant to be empty?

"Describe some of the risks that can arise from the use of derivatives."

Thanks!

Hello @onion

This set of notes is currently being updated to reflect the new learning objectives that were added in 2016. If a learning objective is blank, it has not been updated yet. Once the document has been updated and published, it will be added HERE in the forum to the list of updated and new materials.

Thank you,

Nicole

 

[KJ00]

Hello,

I have a question regarding example of margin account operations in Hull study notes (page 24). We have 2 gold contracts. Each 100 ounces. Initial Future Price is 600$. In example on 5-Jun Future price is 597$ and 6-Jun Future Price is 596$ and daily gain/loss is calculated as 180$. Shouldn't it be 200$?
Or I am missing something? Maybe there were some roundings ? If the price would be 596.1$ it would give us the -180$.

Thank You for explanation,

Kamil

 

[rajivpro]

@KJ00 Yes you are right. I too had a similar doubt but soon realized that the daily settlement prices have been rounded off which can be considered an error in the question. But looking at the larger picture, you seem to have to got the concept right. Exam questions will not have such errors. I think @David Harper CFA FRM emphasis was on the concept that as the "Daily settlement prices keep on decreasing such that the cumulative losses wipe off the initial margin to a level below the "Maintenance Margin", the margin account needs to be topped up to the "Initial Margin" amount. That is to say that the "Margin Call" will equal the difference between the "Initial Margin" amount & the "Margin Balance" amount. Looping in @Nicole Manley to decide if she wants to rectify the error although I feel it's not necessary

Thanks,
Rajiv

 

[David Harper CFA FRM]

HI @KJ00 Yes, apologies but the value (in the spreadsheet) for Jun 6th is $596.10 yet the page mistakenly shows rounded prices. You aren't missing anything, you are correct. Sorry. Thank you!

 

[kevolution]

Not necessarily an error, but some feedback --

McDonald, Ch.6 Instructional Video there's a rather noticeable background noise in the video that sounds like a sprinkler system that makes it difficult to watch/listen to the video. Spot checking other videos (like the Hull ones), this noise isn't present in those videos. Not sure if you could do any filtering, but I could not finish the video due to this annoyance.

 

[kevolution]

There' s a typo in Tuckman Ch.20 Study Notes under the monthly interest payment calculation example. It should say $100,000 x 0.04/12 not 0.014/12.

 

[jameskb10]

hi David, i was looking at the diagram in the Hull notes page 76, if "k > r is the same as r < k" we have normal backwardation, "k < r is the same as r > k" should be normal contango.. i think there is an error somewhere....

 

[ShaktiRathore]

Hi,
The forward price, F(o,t)= S0*exp(rt) and Expected spot price=E(St)=S0*exp(kt) where k is the systematic mkt risk
thus F(o,t)/E(St)= S0*exp(rt)/S0*exp(kt) =>F(o,t)=E(St)*exp((r-k)*t).In normal backwardation F(o,t)<E(St) =>exp((r-k)*t)<1 =>(r-k)*t<0 =>r<k or k>r for high systematic risk the long speculator demand compensation in terms of high E(St) price relative to forward price.In normal contango F(o,t)>E(St) =>exp((r-k)*t)>1 =>(r-k)*t>0 =>r>k or k<r .Yes there is an error.
thanks

 

[jameskb10]

thank you Shakti

 

[Roberto Hernández]

Hi Team,

I hope you're doing great. Small not substantial, kind of typo error. R19.P1.T3.Hull, page 37, please see image below.


Also, please let me know if you would like me to post about these minimal errors I find along the way.

*Edit, I see it's actually a footnote! So most likely it should only be placed as a superscript.

Thanks!
-Roberto

 

[Nicole Seaman]

Hi Team,

I hope you're doing great. Small not substantial, kind of typo error. R19.P1.T3.Hull, page 37, please see image below.

View attachment 1032
Also, please let me know if you would like me to post about these minimal errors I find along the way.

*Edit, I see it's actually a footnote! So most likely it should only be placed as a superscript.

Thanks!
-Roberto

Hello @Roberto Hernández

Thank you for pointing this out. We appreciate any errors that are pointed out, even if they are small like this. We will make sure to fix this in the updated version of these notes.

Thank you,

Nicole

 

[JulioFRM]

Hello, I think that in page 80 of the study notes part 1 b 3, it should say systematic risk, not systemic. Example 6.2 of P1 T3 Study Notes pg 91.

 

[Nicole Seaman]

Hello, I think that in page 80 of the study notes part 1 b 3, it should say systematic risk, not systemic. Example 6.2 of P1 T3 Study Notes pg 91.

Hello @JulioFRM

Please note that I moved your post here to this thread that was created specifically to point out errors in the study notes (there is a thread like this under each topic section in the forum). When pointing out any of these errors, please list the details about the specific set of notes that you are referring to, as there are many sets of notes under T3.

Thank you,

Nicole

 

[David Harper CFA FRM]

Hi @JulioFRM thank you, absolutely true, that's an expert catch on your part: page 80 should be systematic (risk that cannot be diversified away) rather than systemic (risk that default by one institution will lead to defaults by other financial institutions). (@Nicole Seaman but this is a non-urgent edit, per the wrike task i added)

@JulioFRM what is the meaning of "Example 6.2 of P1 T3 Study Notes pg 91."? Thank you again ...

 

[JulioFRM]

The set of notes are Hull, Options, Futures Chapters 1, 2, 3, 4, 5, 6, 7, 10, 11, 12 & 26.
Also in page 83 it says "Assume that corn has the following properties: positive storage cost, no convenience
yield, and positive systemic risk".
Oh about Example 6.2, that was a different thing, I had a question but now I understand
Thanks!

 

[SyroneDavid]

'' In the second scenario, the producer is exposes to a future spot price decrease, such that the appropriate hedge is a short position in coffee futures contracts. In this case as the future sale price is not predetermined, the underlying exposure is effectively a short position such that the hedge instrument is a long position. ''

Concerning scenario 2, i need a little clarification on the difference between the appropriate hedge being short and the hedge instrument being long

Edit: So I found out that the last sentence this is a typo on the notes, so all's good

 

[David Harper CFA FRM]

Okay thanks @SyroneDavid good to know. cc @Nicole Seaman in case we have an extant typo in the study note. Thanks,